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January 25, 2013

Top Portfolio Products: Schwab Adds New Target Date Funds

BlackRock introduces reconfigured fund; more

New products introduced over the last week include new target date funds from Schwab; BlackRock introduced the Managed Volatility VI Fund, formerly BlackRock Balanced Capital VI; Salient Partners introduced its new Risk Parity Fund; and First Trust Advisors launched its new Short Duration High Income Fund.

In addition, Curian Capital introduced its Select Portfolios; CANNEX announced a new product education platform; and RMS announced that its Savings Plan Management program offers advisors a way to provide advice on 401(k)s without becoming fiduciaries.

The Schwab Target Funds are mutual funds designed primarily for retail investors, and offer shareholders a diversified portfolio of both active and passive management, as well as a combination of proprietary and externally managed strategies. They have net operating expense ratios ranging from 0.55% to 0.84%, and a $100 account minimum.

The SMRT and SIRT funds, maintained by Charles Schwab Bank as trustee, offer target date portfolios in a collective trust vehicle that are diversified across traditional and nontraditional asset classes. The SMRT funds use a combination of active and passive investments while the SIRT funds use primarily passive investment strategies. The SMRT funds are available in four unit classes with all-in operating expense ratios starting at 0.45%; the SIRT funds are available in a single unit class with no investment minimums and an all-in operating expense ratio of 0.18%. They are available to eligible, qualified retirement plan clients of Charles Schwab Bank, and to such entities through other retirement providers via the National Securities Clearing Corp. (NSCC).

2) BlackRock Introduces Managed Volatility VI Fund

BlackRock announced Wednesday that it is making available to insurance separate accounts the BlackRock Managed Volatility VI Fund. Previously named BlackRock Balanced Capital VI, the fund has changed by adding investment flexibility and risk controls to engage various opportunities through direct investments in individual securities, derivatives and affiliated and unaffiliated mutual funds and ETFs. The fund is managed by Philip Green, a portfolio manager from the multi-asset portfolio strategies (MAPS) team.

The fund’s tactical asset allocation strategy will concentrate on identifying opportunities based on valuations, macro environment, market sentiment, and other idiosyncratic factors. Furthermore, the fund takes a disciplined approach to managing volatility to seek to provide a more consistent investor experience while maximizing returns. The fund uses proprietary and market-based tools to seek to “de-risk” the portfolio in high-volatility environments, and “re-risk” the portfolio when volatility falls.

The fund seeks to generate long-term capital appreciation, and primarily invests in futures contracts and other financial instruments with exposure to global equity markets, global interest rates markets (related to government bond markets of developed nations) and global commodities markets. It targets a 15% volatility level spread equally across equities, commodities, interest rates and momentum (the continuation of recent price trends).

4) First Trust Launches First Trust Short Duration High Income Fund

First Trust Advisors L.P. announced Tuesday that it has launched the First Trust Short Duration High Income Fund (FDHAX/FDHCX/FDHIX). The fund seeks to provide a high level of current income, with a secondary objective of capital appreciation. It utilizes a short-duration strategy designed to maximize income and limit interest-rate risk by investing at least 80% of its net assets (plus the amount of any borrowing for investment purposes) in high-yield debt securities and bank loans that are rated below investment-grade or unrated. The fund may also invest in investment-grade debt securities and other debt instruments, such as convertible bonds and preferred stocks.

The combination of senior loans and high-yield bonds is expected to give the Fund’s portfolio a blended duration of three years or less, which may provide high current income while limiting price volatility associated with changes to interest rates. By investing in high-yield securities with better credit quality, the fund’s portfolio managers, William Housey, senior vice president and senior portfolio manager, Scott Fries, SVP and Peter Fasone, vice president, attempt to limit potential defaults of portfolio investments.

5) Curian Capital Introduces Select Portfolios

Curian Capital LLC announced Tuesday the launch of its new Select Portfolios, designed to provide financial professionals with managed accounts that are easier for investors to understand, as well as user-friendly and intuitive for quicker account setup and administration.

Select Portfolios include six objective-based guidance strategies arrayed across a risk spectrum, ranging from conservative objectives to the potential for maximum growth. The six strategies available include diversified income; multistrategy income; equity income; multistrategy growth; global growth; and global maximum growth. Utilizing a purpose-based approach to helping clients realize their goals, financial professionals will have the ability to evaluate each investor’s unique needs and create a custom investment plan based on risk tolerance and investment objectives.

6) CANNEX Launches Advisor-Friendly Product Education Platform

CANNEX announced Tuesday that it has launched a product education platform with the introduction of annuity and retirement income educational tools designed to enhance advisors’ financial planning processes when serving their client’s retirement income needs. A suite of income annuity analysis tools is the first in a series that CANNEX will introduce over time and includes the instantaneous generation of personalized, video-based illustrations using a client’s unique profile data and choices, such as the type of income annuity contract being considered.

The tools are available to advisors through CANNEX Retirement Income Product Exchange (RIPE), which enables advisors to price- and feature-shop from among hundreds of fixed deferred and income annuity products. RIPE is used by dozens of life insurers and is available to more than 200,000 advisors in the U.S. and Canada.

7) RMS Savings Plan Management Offers 401(k) Solution

Advisors who provide advice on 401(k) plans are generally prevented from providing advice on rollovers as participants leave the plan due to a cross-selling prohibition. Furthermore, advisors who are fiduciaries are prohibited from receiving variable compensation such as 12b-1 fees. However, Retirement Management Systems says advisors can use its Savings Plan Management program to offer fiduciary advice on 401(k)s without becoming a fiduciary under ERISA regulations, and can avoid triggering prohibited transaction rules if they later advise participants on rollovers.

RMS, an investment advisor registered under the Investment Advisers Act of 1940, provides the research on the investment option in a plan and applies the participant’s needs to one of seven strategies in the program. RMS occasionally reallocates and rebalances the plan. With fiduciary advice being provided through RMS and the Savings Plan Management program, advisors are free to advise participants on rollovers. Also, using the Savings Plan Management program as a provider of fiduciary advice frees advisors from the self-dealing restrictions under ERISA’s prohibited transaction rules.

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